Germany’s leading economic advisers have sharply cut their growth forecast for 2026 and warned that social insurance contribution rates could rise to nearly 50 per cent by 2040 unless major reforms are implemented to stabilise the welfare system.
In its Spring Report 2026, released on May 27, 2026, the Sachverständigenrat zur Begutachtung der gesamtwirtschaftlichen Entwicklung (Council of Economic Experts) revised its projection for German GDP growth this year down to 0.5 per cent from a previous estimate of 0.9 per cent.
The five-member panel, appointed by the German president and known as the “Five Sages”, is chaired by the economist Monika Schnitzer.
The downgrade is attributed primarily to the economic fallout from the Iran conflict, including sharply higher energy prices, alongside structural weaknesses and subdued global demand.
Energy prices surged after Iran effectively closed the Strait of Hormuz, a key route for global oil and gas exports, in response to US-Israeli strikes launched on February 28, the Council said.
For 2027, the Council expects growth of 0.8 per cent. Consumer price inflation is projected to reach 3.0 per cent this year before easing slightly to 2.8 per cent.
The German Chamber of Industry and Commerce (DIHK) echoed the bleak outlook in its Early Summer 2026 business survey, based on responses from more than 23,000 companies.
The DIHK halved its own 2026 growth forecast to just 0.3 per cent and warned that Germany is “living off its substance”.
DIHK chief executive Helena Melnikov described a “double crisis” in which the energy shock from the Middle East has compounded long-standing structural problems.
Business sentiment has deteriorated sharply, with the DIHK sentiment index falling to 88.1 points, well below the neutral level of 100. Investment and hiring plans have weakened further, while energy and raw material prices are now cited as the top risk by 70 per cent of firms.
“Unlike in previous crises, many businesses have hardly any reserves left to cope with the pressures. In Germany, we are living off our savings,” Melnikov said.
“We urgently need courageous reforms” and “right priorities” from the federal government.
The Council of Economic Experts’ report also focuses heavily on the long-term sustainability of Germany’s social security system.
Under current policies, the combined social insurance contribution rate is projected to climb from 42.3 per cent today to 45.4 per cent by 2030 and 49.7 per cent by 2040, driven by demographic ageing. The rate covers pension, health, long-term care, accident and unemployment insurance.
Such increases would dampen economic growth by reducing household consumption and raising labour costs for businesses.
The experts call for a package of reforms to curb expenditure growth, particularly in health and long-term care, while strengthening incentives to work, improving prevention and exploring greater capital funding.
Schnitzer said the projected rise in social insurance spending should be slowed and warned that the opportunities created by the special infrastructure fund must not be squandered.
In October 2025, the German Council of Economic Experts said the retirement age should be raised to 73 to keep the country’s social security system from collapsing.
The German economics ministry has significantly lowered its growth outlook for Europe’s largest economy, halving its forecast for 2026 and also revising up inflation expectations, in a fresh sign that Berlin’s long-promised recovery remains fragile. https://t.co/kTsCtHFwQq
— Brussels Signal (@brusselssignal) April 23, 2026
